Homeownership Subdivision Development in a Post-Recession Environment
Organizational Structure & History PathStone is a not-for-profit community development and human service organization providing services to low-income families and economically depressed communities throughout New York, Pennsylvania, New Jersey, Ohio, Indiana, Virginia, Vermont, and Puerto Rico. PathStone Alliance for Better Housing (PABH) is a fully controlled affiliate of PathStone focused on housing. Prior to the affiliation in 2012, Alliance for Better Housing was a small rural non-profit focused on housing counseling in Chester County. The organization had also developed two affordable for-sale townhome communities. PathStone s Pennsylvania division had developed several small rural rental developments. Prior to this project, most recent completed in 2005 PathStone s Pennsylvania Housing Division includes: A Director/Real Estate Developer Two housing counselors (one for central PA, one for southeastern PA) A program assistant
Local Context/ Market Conditions Oxford Boro Chester County is the second most expensive County in the state Major mushroom production center Median sales prices for homes Q4 2012-$305,000 Oxford Borough is a small but growing rural center Majority of clients served by PathStone are Latino households employed in the mushroom industry. Many have limited English proficiency
Homeownership Counseling PathStone s Chester County office Client Volume Per Year: Provides pre- and post-purchase counseling to 80-100 households Packages and closes 15-20 USDA 502 loans Benefits of counseling/packaging to a development program: Pipeline of potential buyers Ability to pre-qualify households in-house Knowledge of housing market
Market Niche Average price of homes purchased by PathStone s clients is $210,000-$220,000. Housing stock at that price point is limited, and even with subsidized interest rates available through the USDA 502 program, households earning under $45,000 can rarely qualify Opportunity to develop a lower priced product through project level subsidy, which could be made even more affordable with subsidy at the household level
The Project
The Project 41-Lot Fully Approved Subdivision 27 lots in Phase I, 14 Units in Phase II Both Phases part of a single Homeowners Association Phase I infrastructure and homes built out Owner was seeking to sell Phase II 14 Lots Vacant land with no infrastructure Existing Built-Out Homes 27 3-bedroom 2.5 bath units Unfinished basements Two parking spots in shared parking lot Sales price ranged from $190,000-$200,000 over several years of sales Five units of Phase I unsold when PathStone purchased Phase II
Putting the Pieces Together Financing Concept PathStone s development of Phase II included project level and buyer-level subsidy HOME funds (through Chester County) structured as soft second mortgages, County allowed them to be lent in during construction. Reduced construction interest and improved loan to value Homes were pre-sold and project was phased to be built by building First mortgage obligations for Building 1 were secured before the construction financing closed
Unit Design First Floor & Options
Phases & Parking Reconfiguration
Original Parking Configuration
Pre-Qualifying Buyers First Mortgage & HOME Subsidy Homebuyer first mortgage payments, including principal, interest, real estate taxes and insurance range from about $750-$1,100
Oxford Townhomes Financing Structure
Oxford Townhomes Financing Structure
Oxford Townhomes Financing Structure
Financial Surprises & Challenges HOME CHDO regulatory changes Federal Home Loan Bank AHP program since the recession changed disbursement practices so funds released only after home are sold; impacted Loan-To-Value calculations during underwriting Conventional bank lender offered favorable terms but backed out late in the process LISC stepped in as lender and saved the day Local government often requires financial security for public improvements we ultimately had to borrow cash and fund an escrow account with a local bank
Other Challenges to Rural Subdivision Development Availability and cost of water and sewer connections Time involved in securing local approvals due to low staffing levels at the municipal level; municipalities may have limited experience working with larger scale development projects In this project, minor site changes required local approval process nearly as extensive as a new project
Surprises & Challenges Issues inherited due to purchasing a portion of a subdivision Issues with turnover of Homeowner s Association (HOA) from original developer; incomplete records and under-funded operating and reserve accounts
What Worked Strong housing market with high demand and high home values Pre-Sales Phasing Flexible lending partner In-house experience with development and homeownership counseling Parent non-profit (PathStone) with internal resources and access to capital through partners like LISC County financial support/ HOME seconds Product type with options for varied housing needs Experienced Third Party HOA Management Firm
Looking forward New homes for 14 families who otherwise would have been locked out of the local housing market Now have a model home design that can be utilized in future projects (architect has granted re-use permissions) Project gave PathStone s Pennsylvania housing division visibility after a long period of inactivity Project documents such as contracts and sales agreements can be adapted for future developments Goals for a second project: More units, use phasing strategy Find land which can accommodate for-sale and rental units to share costs and risk Bring in more project level subsidy, since appraised value limits ways in which buyerlevel subsidy can assist the developer
PathStone Pennsylvania Housing Staff Contact Info Wendy Carter - Development wcarter@pathstone.org 610-925-1880 717-645-8266 (cell) Guillermo Rivera Homeownership Counseling/Loan Packaging grivera@pathstone.org 610-925-1880